Energy Market Update – July

The past month has been pretty exciting in the energy sector.  We saw some huge jumps, there were days the market gained over $3/barrel and days it lost that much and more.

Looking back, crude oil was valued at $65.91 30 days ago, it saw its highest price on June 27th at a whopping $77.41, then ended it’s month long adventure, currently sitting at $68.06.  That’s puts it up about 3.5% in the past month.  Compared to last year at this time though… we are 32% higher, crude was at $46.02/barrel!  What a difference a year can make!

Now let’s take a look at the energy commodities: Over the past 30 days the only commodity to follow crude oil was Propane, seeing a 4% rate increase; in the heat of summer.  This is super odd, since we would expect propane to run its own show during times of what should be higher supply and low demand.  But thanks to the continued record exports, our supply is not building like it used to!  I wonder if the propane “summer fill” will become a thing of the past?  Will we as consumers be forced to start tinkering with the idea of full year lock in pricing, as opposed to winter lock-ins???

Gasoline and Diesel played a little different game this month.  While Crude & Propane both saw small increased values, Gas & Diesel both ended this 30 stretch with small losses.  Gas was down about ¾% which amounts to about 1.5 pennies, while diesel was a little more aggressive with a 2.5% loss; equaling a little over a nickel.  It’s odd that we saw these losses especially with the higher crude values, then factor in that we are technically right in the middle of our official “driving season”.

Now, why so much volatility this month?  First off, OPEC, with the help of Russia was very vocal this past month.  Looks like Venezuela, as expected is down for the count, they have totally discontinued all oil production indefinitely, mid to late June this created quite a stir with fear of a total lack of supply.  But don’t worry, Russia and Saudi Arabia and going to pitch in and help out!  Both countries were allowed to break their cut agreements with OPEC and start producing right around 600,000 more BPD!  But, wait just a minute, after this verbal agreement was made, our President decided to take to twitter and praise the efforts of OPEC and their way of handling the lack of supply.  Nice gesture, right?  Well, I think everyone forgot how much the Iranians hate our President.  After Mohammed Taed, Iran’s OPEC rep saw this, he was like…not so fast, I think our supply is fine.  He then, went on this big crusade to stop Russia and Saudi from producing more Oil.  After a few days of serious energy volatility, his efforts failed and everything reverted to the original plan.  Just as things got back to normal and markets settled down and were getting comfy in that $70/barrel range, our dear President once again, took to twitter urging other countries to stop buying oil from Iran!  And the cycle of volatility continues!

The next month may be interesting; we are anticipating more crude oil production over seas, but on the other side things Canada has recently seen some major production woes.  This is also the time of year for refinery maintenance.  I think refineries have been putting off their scheduled maintenance because of crude oil and commodity values, trying to hold off until pricing comes down.  What I see happening in the past week though, is unscheduled ER maintenance and breakdowns.  So, I kind of think they are not doing themselves any favors by being a little greedy and postponing those scheduled repairs. The China & Canadian tariffs may continue to play a small part in our fuel values also, I see this as more long term than short though.

Now, what can you do as consumers to protect yourself with the prospect of continued volatility?

  • Know your annual fuel budget
    • How much can you spend on diesel/propane?
  • Be realistic with pricing
    • If diesel is $2.50 at the pumps, it’s certainly not going to be $1.50 delivered on the farm!
  • Communicate your needs to your energy consultant
    • Look at contracting during your peak use times
    • Communicate this with your energy consultant
  • Look for ways to become more efficient
    • New windows/more insulation/new appliances-LP savings
    • Maybe you need to look at a higher quality diesel engine oil to improve fuel economy
    • Look at new technology for planting-Precision Planting?
    • Maybe add more fuel tank capacity at your site- more fuel available/better pricing

With the lower value of milk and the rising costs of fuel, building materials and just about everything else we need to stay in business, this has not been an easy last year for most.  But, I like to think that, if we all continue to work hard-together; everything will work out in the end.  It has to- I love what I do for a living and I want to keep doing it for at least another 20 years & I need all of you to keep doing what you do, to make this happen!

by Kim Leisner, Energy Sales Manager

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